12th Nov 2014 09:42
LONDON (Alliance News) - Regional airline Flybe Group PLC saw its shares slide Wednesday after it said it swung to a loss in the first half of its financial year, hit by a series of write-downs, charges and revaluations, although its operational performance continued to improve.
The airline also said it has sold its 60% stake in loss-making Flybe Finnair to the Finnish airline and joint venture partner Finnair for just EUR1.
However, it wrote-down its investment in that venture by GBP9.9 million, adding to a GBP6.0 million provision for flight delay rule change provisions, a restructuring and surplus capacity cost of GBP10.4 million and a USD8.0 million hit from revaluations of its dollar loans.
Those charges meant it reported a net loss of GBP15.4 million for the six months to end-September, compared with a GBP13.6 million profit a year earlier.
Its pretax profit excluding the restructuring, surplus capacity costs and revaluation on dollar aircraft loans also dropped to GBP1.5 million, from GBP12.2 million a year earlier, as revenue dropped to GBP307.8 million from GBP351.1 million.
Flybe's decision to offload its joint venture stake leaves it with its UK-based operation and a white-label operation with Finnair. It wants to push further into white label flying, where the company operates routes branded under another carrier. Its UK operation is one of the only remaining UK regional airlines, competing mainly with road and rail services from 35 airports, as well as flying to some European destinations.
It made big losses in recent years, and had to embark on a wide-ranging restructuring programme in an effort to cut costs and return to profitability. That revamp has included cutting staff numbers, stopping unprofitable routes and taking ownership of more of its own aircraft. That meant it returned to a pretax profit in its last financial year, its first for four years.
Chief Executive Saad Hammad, who took the helm last August and has been leading the restructuring started by predecessor Jim French, said its last financial year had marked "the rebirth of Flybe!".
Hammad Wednesday said the company was still making significant progress in dealing with its legacy operations while continuing the improvement in its UK airline.
"We have taken decisive action in removing the overhang of the outstanding USD750 million order for 20 unwanted E175 aircraft, withdrawing from the Finland joint venture as well as providing for the potential costs for the arbitrary EU 261 regulation for flight delay claims in Flybe UK. We are working hard to resolve our surplus fleet issue," he said in a statement.
In its UK airline, passenger revenue per seat rose 8.7% in the first half to GBP54.75, load factor rose 8.6 percentage points to 77.2%, and it said it's on track to deliver cost savings of GBP24 million in the full year.
Adjusted pretax profit for the UK airline rose to GBP13.7 million, from GBP11.7 million, despite the GBP6.0 million for flight delay compensation under EU regulation 261, it said.
"We delivered an increased adjusted profit before tax in the Flybe UK business and importantly became cash generative. Though our business transformation is far from complete, we are seeing the benefits of improved commercial execution with the right cost base and we now have improved operational and financial disciplines throughout our organisation," Hammad said.
"We are undertaking a measured approach to growth in the second half with our launch of new routes to and from London City Airport. In addition, today we have announced that we will be opening new bases in Bournemouth and Aberdeen. Whilst there are still a number of challenges ahead, Flybe enters the Winter season with solid momentum in its core UK business," he added.
Flybe said current trading in its fiscal third quarter is meeting its expectations. It said the UK airline's current profile for the quarter is a 5% reduction in seat capacity and a 1% increase in passenger revenue per seat. It had sold about 56% of seats for the quarter on November 7, up from about 52% a year ago. It also said it has hedged the majority of its fuel and foreign exchange exposure.
Flybe shares were down 15.8% at 110.88 pence Wednesday morning, one of the worst-performing stocks on the London market.
By Steve McGrath; [email protected]; @stevemcgrath1
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